industry insights

Read about the latest trends, innovations, and market events in the transportation industry. From strategic planning to fuel management and supply chain transportation optimization, see what's new.
Sign Up to Be in the Know

Get our latest articles delivered straight to your inbox.

Read more
Market Events
August 30, 2021
Hurricane Ida Hits U.S. Gulf Coast Near New Orleans | Advisor Pulse

Energy Market Update

Hurricane Ida quickly intensified to a Category 4 hurricane as it made its U.S. Gulf Coast landfall near New Orleans, Louisiana energy hub on Sunday, August 29. Ida has since dissipated to a tropical storm that is expected to move northeast to parts of southern Mississippi, the Tennessee and Ohio Valleys, and Southern Appalachians through Wednesday, September 1.

Thus far, crude oil and diesel price increases have been limited to less than $1.00 per barrel and 2-3 cents per gallon, respectively. This is largely due to unknowns surrounding the severity of the storm’s damage to production infrastructure and timelines for restarting operations. Preliminary damage estimates indicate multiple New Orleans-area refineries may need to wait a few weeks before beginning restart procedures, but exact schedules are yet to be determined.

Ida's Impact on Supply Fundamentals

The storm’s energy market implications from a supply standpoint are primarily centered on Louisiana. New Orleans and Baton Rouge alone house nine refineries that represent about 13 percent—2.4 million barrels per day—of total U.S. refining capacity, of which nearly 1 million barrels was shut in leading up to Ida’s landfall. Additionally, about 96 percent of the U.S.’ total offshore Gulf of Mexico crude oil production was shut down while the storm moved toward the coast.

Implications for supply and price are expected to be greater for refined products, however, because the hurricane was much weaker near offshore oil platforms prior to its New Orleans arrival. Colonial Pipeline Company also announced it was closing its two main gasoline and diesel lines that pump products up the eastern seaboard to North Carolina as a precautionary measure. This should add to the supply disruption and could create a fuel price response similar to what we saw during the Colonial’s outage in May.

Ida's Impact on Prices

Diesel price pressures are expected to extend beyond Louisiana in the coming days as local power outages and flooding persists. The state’s large footprint on refined product production and distribution means neighboring states could see some supply shortages that draw down inventories during the restart period.

Diesel, gasoline, and crude oil inventories in the U.S. are all presently below the five-year average, meaning the offline refining and crude oil production this week should further deplete inventories and support prices. While a lack of clarity around refinery and pipeline operations is currently insulating prices, we think refinery and pipeline downtime may create minor regional diesel price premiums in coming days.

Freight Market Update

Hurricane Ida disrupted transportation infrastructure around the New Orleans market across multiple modes of transportation. This will likely cause delays and tight capacity in the region as the area recovers from the storm.

Truckload shipments typically ramp up ahead of storms making landfall, but this was not necessarily the case this go around. It may be because the storm was not anticipated to reach a Category 4 level until a day before it hit the U.S. Gulf Coast. It is expected, however, that the recovery will call for a larger spike in freight demand into Louisiana, with the already-tight capacity potentially resulting in climbing spot rates.

From an intermodal perspective, all Class I railways have announced they had to shut down terminals and interchange facilities due to flooding. This will add to intermodal congestion that has been occurring throughout the pandemic. Below are a few of the closures that were announced. Shippers should expect delays in freight moving to or through New Orleans.

  • Norfolk Southern (NS) closed their New Orleans terminal Monday but is expected to resume operations on Tuesday. NS told its customers to expect delays of 48 to 72 hours for all shipments arriving or departing from the terminal.

  • Kansas City Southern (KCS) suspended mainline operations and interchanges from New Orleans to Baton Rouge and Gulfport & Hattiesburg, MS. There is currently not an estimated time to reopen because they are waiting for the flooding to recede.

  • BNSF shut down all operations between Lafayette, LA and New Orleans ahead of the storm’s arrival starting Saturday, August 28.

  • Union Pacific (UP) suspended operations at its Avondale, LA terminal ahead of the storm’s arrival starting Friday, August 27.

  • Some additional U.S. ports in the Gulf of Mexico closed Monday, including the Port of New Orleans and the Port of Mobile. These are expected to be short-term closures, potentially opening back up as soon as Tuesday, August 31.

We will continue monitoring the storm’s fuel and freight market impacts in the days ahead and provide further updates should any major developments follow Ida’s regression.

Drew Collar

Be the first to know.

Get our latest articles delivered straight to your inbox.